Memorandum of Conversation, by Mr. J. W. Barnet of the International Resources Division

Participants: Asst. Secretary Braden
Ambassador Thurston
James Wright, A–Br
Ellis O. Briggs, ARA
Joseph Flack, NWC
Donald D. Kennedy, IR
James Espy, NWC
John Barnet, IR

This meeting was called in Mr. Braden’s office in order to decide the proper course of action for the Department in relation to continued representations being made by Bolivian tin mining interests (particularly Hochschild’s), and the Bolivian Government through Ambassador Andrade, regarding the re-negotiation of the present tin ore contract. Mr. Braden and Mr. Wright summarized the principal arguments which the Bolivians had been presenting recently in connection with their requests that the price for tin ore should be increased, and that the contract should be extended beyond its present expiration date of June 30, 1946. These arguments, which have also been advanced to IR representatives by Mr. Hochschild, pertain to the reputedly large increase in labor costs (blamed principally upon the Magruder mission),66 higher costs of mining materials and transportation, and the Bolivian decree requiring mining companies to turn over 60% of their receipts for foreign exchange purposes. The Bolivians have also asserted that it was unfair of the U.S. to have begun decreasing the price, as is done under the current contract, since, it is pointed out, the price paid for tin ore by the U.S. during the war increased considerably less, relatively, than the prices paid for zinc, lead and other metals. The Bolivians have also expressed concern over the future of their relations with the U.S. on expiration of the current contract, since they state that the tin mining industry is at present placed in a position of considerable uncertainty that may, together with the decrease in price scale, hinder production.

Mr. Kennedy reiterated the counter arguments that had been presented already to the above claims made by the Bolivians. He stated [Page 378] that a further investigation into the relative price situation among various metals would show a fallacy in the Bolivians’ argument with respect to the base price used in each case. Mr. Kennedy also said that since the Bolivians had shipped several thousand extra tons of contained tin to the U.S. during the second half of 1945, apparently in order to take advantage of the decreasing price terms, it should be expected that during the first half of 1946 a corresponding decrease in exports from Bolivia might be anticipated regardless of whether or not the prices were increased at this time. Mr. Kennedy brought out particularly the abnormal character of the Bolivian export tax on tin ore, which represents the highest rate in the world superimposed upon the highest cost of production of any important tin-producing country. Mr. Barnet mentioned that estimates so far received indicated that during the latter part of 1947 a world surplus of tin might begin to develop and that, therefore, Bolivia would again have to compete commercially with Far Eastern sources, which might be quite difficult if the price of Bolivian tin were raised and maintained above its already rather high level. Mr. Kennedy finally stated that from a supply viewpoint it would appear possible that the current contract could be extended until the end of 1946, with no decrease in price below the level reached as of June 30, 1946.

Ambassador Thurston was asked to report on the possible political repercussions involved in carrying out the present policy of gradually decreasing the price paid for Bolivian tin ores. He discussed the various aspects of the problem, including the dependence of the Bolivian Government upon the tin mining industry for revenue, as well as the effects of Bolivian legislation and decrees on the tin mining situation. He also mentioned particularly the matter of personal danger encountered by the American technical staffs of the various tin mining companies. He said that there was a rather chronic condition of restiveness in any event, because of the obvious dependence of the Bolivian Government on tin and that he did not believe that the political situation would become significantly worse if the U.S. decided to continue toward the goal of helping to bring Bolivia more into line with future world competitive conditions. Mr. Thurston stated, further, that President Villarroel had indicated the Bolivian Government was already taking into account in its 1946 budget the expectation of decreasing revenues with the declining price of tin ore, and that a corresponding effort at readjustment was being undertaken within Bolivia. The Ambassador said, in conclusion, that he believed the U.S. Government had already liquidated its so-called commitment toward Bolivia by having paid a very high subsidy price for tin ore during and after the war.

[Page 379]

Mr. Braden said that it appeared one of two policies could be adopted in relation to the Bolivian requests:

The Bolivians might be informed now that U.S. representatives would be willing to discuss immediately the contract question, if the Bolivians would be willing to consider, as a part of the discussion, all other related factors, such as taxes, exchange controls and budget, and would guarantee performance.
The Bolivians could be told currently that it was impossible to reopen the contract now and that as a matter of fact they might face a worse situation after June 30. After further representations and requests by official Bolivian Government representatives, it could be indicated to the Bolivians that we would be willing to discuss the whole problem, including taxes, exchange and budget, as it affected the period following June 30, 1946.

It was unanimously agreed that the policy outlined in (b) above, should be adopted.

  1. For documentation on this mission, see Foreign Relations, 1943, vol. v, pp. 607 ff.